M/S CONC CONSTRUCTIONS PVT LTD vs CANARA BANK on 2 January 2023

FINAL ORDER

1. The present appeal is filed by the Appellant company under Section 30(1) of the Recovery of Debts Due to the Bank And Financial Institution Act, 1993 read with Section 151 of the Code of Civil Procedure, 1908 seeking to set aslde the attachment order dated 30.O3.2O22 passed by the Recovery Officer-Il of this Tribunal in DCP No'452/2021 in OA No.1657/2018 attaching the Fixed Deposits No.140000286985 lot Rs.82,77,332'94 and 140000287183 for Rs.75,70,638.65 maintained by the Respondent No 1 Mr Abdul Rehman in the name of Commissioner CMC and further to declare.that the action of the Recovery Officer in including the above Fixed Deposits in the name of Commissioner CMC through Mr Abdul Rehman, without making the City Municipal Corporation and Appellant as party to the DCP No'452/2021 in OA No.165712018 as highly arbitrary and illegal and to grant \ such orders as this Tribunal justice and equity. Appeal (AoR) No.1/2022

in OA N0.16522018 deems fit, in the interest of

2. The case of the Appellant is that, the Appellant is a company engaged in the business of construction and execution of public works. The Respondent No.1 Mr Abdul Rehman is an Engineer and Class I Contractor who was successful in procuring the tender from the Clvtc, Chikmagaluru for execution of two works in Chikmagaluru CMC Limit and the tender prices were Rs.10,35,29,850/- and Rs.9,47,72,9A2/- respectively. It is contended that Respondent No.1 sub-contracted the above_said two works to the Appellant by entering into an agreement dated 19.03.2014 (Annexure-A2) with the Appe ant on the terms and conditions contained therein. In terms of the said agreement dated 19.03.2014, Fixed Security Deposit (FSD) to the tune of 5olo of the project sum was required to be paid by the Appellant herein to the Respondent No.1 who was in turn obligated to keep the same in Fixed Deposit in favour of CMC, Chikmagaluru. prior to execution of the agreement dated 19.03.2074, the Appeflant herein had deposited sums of Rs.51,82,000/- and RS.47,36,OOO/- on 24.07.20!4 which are 5olo of the respective tender prices vide Annexure-A3. It is further contended that the Respondent No.1 on receipt of the said sums kept them in Fixed Deposits with the Syndicate Appeal (AOR) No.1/2022 in DCP No.45212021 in OA No,1657/2018 Bank, Chikmagaluru Branch in Vikas Cash Certiflcates in the name of CMC Chikmagaluru vide Annexure-A4. It was agreed in clause-2 of Annexure-Az agreement that the Respondent No.1 would return the Fixed Deposit along with bank interest to the Appellant after two years from the completion of work. After receipt of the cash certificates, the Municipal Commissioner of Chikmagaluru issued work orders dated

27. oL.2014 in favour of the Respondent No.1 vide Annexure- A5 and the Appellant is stated to have completed the execution of the tender works to the satisfaction of Clvlc Chikmagaluru in the year 2016. After completion of the work, on the request of Respondent No.1 to the Municlpal Commissioner, Chikmagaluru vide Annexure-A6 to return the FSD amount kept in FD with Syndicate Bank to the Appellant herein, the Municipal commissioner, Chikmagaluru issued a letter on 37.72.2027 vide Annexure-A7 addressing to the Chief Manager of Canara Bank to remit the FSD amount in favour of the Appellant. When the Appellant requested Canara Bank on 28.01.2022 vide Annexure-A8 to remit the FSD amount in its favour, the Bank vide its letter on 30.03.2022 produced at Annexure-Ag did not remit the amount on the ground that maturlty redemptions cannot be credited to third- party account. Appellant further contended that it was shocked and surprised to learn that the Respondent No 1 had \

\

in oa No.1657/2018 inter alia, defaulted in making repayment of loan amount to the tune of Rs.15,01,31,709/- towards the Respondent No.6 Bank. Accardingly, Respondent No.6 bank filed an application before DRT, Bangalore in O.A.No.1657/2018 and the same came to be allowed which culminated in recovery proceedings under D.C. P. No.452l212t before Recovery Officer II of this Tribunal and the FD amounts standing in the name of CMC, Chikmagaluru are also part of the recovery proceedings as the same are attached. The grounds, inter alia, urged by the Appellant are, the amounts lying in the above-mentioned FDs are not that of Respondents No.1 to 4 and it belongs to the Appellant herein; Respondent No.1 was merely a name lender to the said amount since he was the main awardee of the tender; it is the setued law that sm qua non for attachment towards recovery of any dues is that the amount which is sought to be attached must belong to the defaulter; the fact of the said amount being originated from the account of the Appellant herein which was utilized for creation of FDs is undisputed; Respondent No.1 himself has in fact admitted in his letter (Annexure-6) that the FSD amount was advanced by the Appellant and the same must be disbursed in his favour after completion of the execution of tender works; the authority of the tender that is CMC, Chikmagaturu vide its letter dated 37.72.2021 has also reiterated the contents oF

in DCP No,452l2OZl in OA No.1657/2018 \ the letter mentioned supra and categorically requested the Respondent No.6 bank to disburse the amount in FDs in favour of the Appellant which makes it crystal clear that the said amount never belonged to Respondents No.1 to 4; in the impugned attachment, the Appellant was never a party to the Original Application in o.A. No.1657/2018 and much less in DCP No.452l2021; the terms of the said agreement stand testimonial to the fact that the Appellant is the one who had borne the FSD amount in the form of above-mentioned FDs; the Learnbd Recovery Officer must apply his mind and ascertain whether the amounts which are attached involves that of any other third parties and upon such enquiry, the Recovery Officer must issue notice to such third party and hear on the maintainability of such attachment and such procedure has not been followed by the Recovery offlcer who has mechanically went on to pass the impugned order which is opposed to the settle proposition of law. In light of foregoing Lontentions and grounds, the Appellant sought for setting aside the impugned attachment order in question.

3. In response to the notice, the Respondents No.s and 6 appeared through their Counsel and subsequently filed statement of objections to the present AOR filed by the Appellant Company, contending that the Appellant has no locus standi lo file the present AOR as the Appellant is neither Appeal (AOR) No.l /2022 in DCP No.45212021 in OA N0.1657/2018 the borrower, nor the guarantor or the tenant or auctioneer and it is liable to be dismissed at the threshold as it is not maintainable in law. It is contended that the Respondent No.1 executing , relevant loan documents in favour of the Respondent Bank agreeing to the terms and conditions contained therein has availed various loans such as vehicle loan of Rs.20,00,000/- on 28.03.2013 for purchase of Volvo Asphalt Vehicle; Housing Loan of RS.6O,OO,OOO/- for Duplex Flats bearing No.901 and 1OO1 on 07.10.2013; vehicle loan of Rs.45,00,000/- on 28.10.2014 for purchasing new Land Rover Jaguar XF Car; vehicle toan of RS.2O,OO,OOO/- on 06.02.2015 for purchasing JCB Excavator and Loader; vehicle loan of Rs.70,00,000/- on 18.05.2015 for purchase of new Audie73.O car; overdraft facility of Rs.7,50,000/- and Bank Guarantee of Rs.8,00,000/- on 22.06.20|7I Gotd Loan facility of Rs.5,35,500/- on 24.70.2017 and another Gold Loan facility of Rs.17,28,000/- on 16.72.2077, another Gotd Loan facitity of Rs..13,48,000/- for business purpose. Respondents No.2 to 4 have stood as guarantors for the credit facilities sanctioned to Respondent No.1. It is further contended that Respondents No.1 to 4 have also opened Fixed Deposit No.14OOO3887O7O fot Rs.18,64,74O/- in the name of Respondent No.1; Fixed Deposit No.140000286985 for Rs.A2,77 332,94 and Fixed Deposit No.140000287183 for Rs.75,70,638.65 both in the \

Appeal (AOR) No.1/2022 in ocP No.45212021

\ name of Commissioner, CMC through Respondent No.1. It is further contended that Respondents No.1 to 4 are very irregular in repayment of the loan installments and in view of the defaults, they are jointly and severally liable to pay Rs.15,01,31,709.57 to the Respondent Bank as on 3f .O3,2022.In the statement of objections, Respondent Bank inter alia further contended that the Appellant has no authority to claim such amount from the Respondent Bank and if any agreement being executed, the same has no nexus with Respondent Bank and Respondent Bank is in no way liable to release the Fixed Deposits to the Appellant as Fixed Deposit is a receipt of deposit issued by bank to depositor. There are only two parties, one bank and second depositor in this transaction and so there is no existence of third party. Fixed Deposit is not a negotiable instrument and not transferable by endorsement and delivery. It is stated and submitted by the Respondent Bank that as per Sections 25 and 28 of the RDB Act, 1993, the Recovery Officer has every such right to proceed with the attachment of the Fixed Deposits. The Appellant is making such allegations with shallow knowledge of law. Adherence of the law and the rules is duly complied with by the Respondent Bank and therefore, no question of any deviance therein and further the Appellant has failed to show any vatid cause to such non-compliance of

Appeal(AOR) No.1/2022 in OCP No.45212021

the order passed by the Recovery Officer. On the foregoing contentions and grounds, the Respondent Bank has sought for dismissal of the present AOR with cost, in the interest of justice and equity.

4. On the above background, I have gone through the records, heard the arguments advanced by Learned Counsels appearing for both sides; and the follo\r,ring points arise for my consideration:

(a) Whether the Appellant Company has made out the case to allow the appeal? and

(b) To what relief, the parties are entiHed?

REASONS

5. Having regards to the material on record, in this case pursuant to the recovery certificate issued by this Tribunal on 07.7O.2O2L in O.A. No.1G57,/2O1B, the recovery proceeding was started by issuing demand notice to the parties on 27.7O.2021 for payment of Rs.15,01,31,709.57 besides interest and cost. During the pendency of the recovery proceedings, on 30.03.2022 order of attachment of Fixed Deposits maintained by Respondent No.1 in the name of Commissioner CMC with Syndicate Bank, which is now merged with Canara Bank i.e. Respondent No.5 was ordered \

Appeal (AOR) No.l /2022 in DCP No.45212021 in OA No.1657/2018 by the Recovery Officer-Il of this Trlbunal. Being aggrieved by the said order of attachment, the Appellant company which is a third party has preferred this appeal before this Tribunal. ln this regard, it needs to be remembered that banks cannot run the execution of DRT cases. This Tribunal has no jurisdiction and powers, which contemplate execution of recovery certificate and as such execution is to be done throuqh the Recovery Officer. Since the bank is holding the recovery certificate in lts favour, it should act as a party facilitator for recovery of public money and ensure that the Recovery Officer of Tribunal wlll perform his duties in execution of recovery certificate, On Rule 52(1), Part III of the Second Schedule to the Income Tax Act, only Recovery Officer has powers to direct any property or such portion thereof, as it may be seen necessary to satisfy the certificate, shall be sold. The Recovery Offlcer also has powers to attach movable property of the Certificate Debtor. For the present case is concerned, the controversy is regarding attachment of Fixed Deposits which have been attached on account of non- payment of Certificate amount by the Certificate Debtor. According to the Learned Counsel for Appellant is concerned, Respondent No.1 secured certain works and the said works were give; to the Appellant company as sub-contract for completion of the work, Accordingly, Annexure-A2 which is an \

Appeal (AOR) No.l/2022 an DCP No.45212021 in oA No.1657/2018 \ agreement between the parties i.e. Appellant company and the Respondent No.1 was entered, The said Annexure-A2 shows that the Fixed Deposit amount was given by Appellant company to the Respondent No.1. Accordingly, Respondent No.1 kept the money in Fixed Deposits with Syndicate Bank (now Respondent No.s bank) Branch in Vikas Cash Certificate in the name of CIYC, Chikmagaluru, which is evident from Annexure-A4. As per unregistered agreement which is Annexure-A2, Respondent No.1 would return Fixed Deposit amount along with interest to the Appellant company after two years from the date of completion of the work in question. It is stated that the work in question was completed in the year 2016. Therefore, as per terms of the agreement, the Respondent No.1 ought to have returned the Fixed Deposit amounts to the Appellant company in the year 2018. But that was not done so. Instead, when the request was made for return of the Fixed Deposit money, the bank concerned did not remit the amount on the ground that redemption cannot be credited to the third-party account. In the meanwhile, Respondent No.1 had defaulted in making payment towards the loans availed by him from the Respondent No.6 bank; accordingly, Respondent No.6 bank filed application before the Debts Recovery Tribunal in O.4.No.16522018 which was allowed. As such, recovery in DCP No,45212021 in OA No.1657/2018 \ proceeding was initiated before the Recovery Officer-Il when the Fixed Deposit amounts were attached as the same was also part of the recovery proceeding. In this regard, the Recovery Officer-Il by notice in writing demanded that the Certificate .Debtor from whom money is due, shall deposit the same and on failure of Respondent No.1 to clear the outstanding dues payable to the Respondent No.6 bank, the attachment order would be operational. Thus, the attachment order becomes operative when law recognizes that there is a debt and that the debt should be immediately payable. Since the amount in question is not paid immediately by the Certificate Debtor, the Recovery Officer concerned must attach the,Fixed Deposits and such order of attachment may continue till the maturity of the Fixed Deposits and on maturity that amount could be remitted to the bank towards adjustment of the outstanding debt payable by the Certificate Debtor. Such Fixed Deposits may represent that the money held by the bank is liable for attachment and Recovery Officer accordingly did it in the course of recovery proceedings. On consideration of the matter in totality, it is not in dispute that the RespoDdent No.1 was in default and he has deposited the money and obtalned Fixed Deposits from Syndicate Bank (now Respondent No.5 bank). Such Fixed Deposit was normally payable after expiry of the period specified in the

Appeal (AOR) No.l /2022 in DCP No.452l2021 in OA No,16522018 \ receipt itself. Normally, the payment of the Fixed Deposit is made on the due date. But on forgoing interest or paying lesser rate of interest, the bank generally permits the customer to withdraw the Fixed Deposit amount before its maturity. The attachment of the amounts in Fixed Deposits could very well be made by the Recovery Officer under the provisions of the Income Tax Act. The dispute here is with the bank which is holding money of the Respondent No.1 which belongs to the Appellant company. The Appellant company has produced an unregistered deed of agreement, but Respondent No.1 who is the best person to say that the money belongs to the Appellant company did not appear before this Tribunal to make such a statement. However, the Fixed Deposits receipts are in favour of Respondent No.1 and as such Respondent No.1 has got no authority to claim such amounts of the Fixed Deposits from the Respondent No.6 Bank since he has been irregular in making the payment of the loans on instalment for which recovery certificate has been issued by the Tribunal. Even if the agreement between the Appellant and the Respondent No.1 is executed, the Respondent Bank has no authority to release the Fixed Deposits to the Appellant company as such Fixed Deposits receipts were issued only to the depositor. Fixed Deposits are not negotiable instruments and cannot be transferable to the

Appellant company even if the claim of the Appellant company is accepted. Hence, in such a situation, the Recovery Officer-Il has jurisdiction to attach the Fixed Deposits. While upholding validity of the attachment order of the Recovery Offlcer-Il, the appeal pending before this Tribunal is liable to be dismissed. Accordingly, I pass following:

ORDER

In the result, Appeal (A.O.R.) No.1/2022 is dismissed. Interim order, if any, stands vacated. pending IAs, if any, also stand closed as infructuous. There will be no order as to cost. (Didated to the Stenographer, after its transcription and necessary corrections, signed and pronounced by me in the Open Court on this 2d day d(January 2023) \o* o' (rMTrAZ Arr) PRESIDING OFFICER DRT-I, BENGALURU